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DAVID DALLAS — Kemper III: Return of the co-op

DAVID DALLAS

DAVID DALLAS

Earlier last week, South Mississippi Electric Power Association (SMEPA) backed out of its partnership with Southern Company of Atlanta and its subsidiary, Mississippi Power Company (MPC). It was a bold step by the Board of SMEPA to protect rate payers but their decision creates even more problems for the embattled Kemper County Energy Facility.

Southern Company’s “clean-coal” is new, untried technology that looks as if it can only bankrupt the state. If it even works, the electricity provided by the Kemper plant will likely be the most expensive in the United States. In fact, the costs associated with Kemper have raised eyebrows and concerns about the viability of “clean” coal throughout the industry. SMEPA alluded to costs and construction delays as the reason for backing out of the partnership.

SMEPA is a cooperative. The member associations provide service to more than 400,000 homes and businesses in 55 of Mississippi’s 82 counties. South Mississippi Electric and its members are consumer-owned, not-for-profit businesses. SMEPA had planned to buy a 15 percent stake in the project. Now, they’ve decided it’s just not worth it.

Southern Company had already notified regulators in Mississippi it may have to raise customer rates by as much as 41 percent to pay for the project. This comes after the Mississippi Supreme Court ruled that customers should be reimbursed for rate increases that were put in place last year: rate increases that were approved by Mississippi’s Public Service Commission after a whole lot of lobbying from both our current and previous governors.

» READ MORE FROM POLITICO: What’s gone wrong for the ‘clean coal’ project that’s supposed to save an industry?

The Mississippi Supreme Court declared that ratepayers’ money “is being confiscated through governmental decree, by a rate increase imposed by a privately owned corporation.” The court ordered Southern Company to issue refunds. Southern Company, naturally, requested a new hearing and has been running an incessant radio campaign offering “facts” to tout the validity of the Kemper project.

The “true” facts are the emperor has no clothes. The plant is now three times the initial projected cost, delays have been extensive, and Southern Company continues to make money promoting a “clean” coal pipe dream that dates back to the Reagan administration.

Now that SMEPA has backed out, Southern Company is accessing its options. Let’s just hope that one of the options is not hanging its subsidiary, MPC, out to dry. MPC is the smallest of the four operating companies Southern owns, serves the fewest customers and generates the least revenue. It may not be all that difficult for Southern Company to cut their enormous losses. They’ve done it before and come out all the more profitable. Just ask our former governor.

The credit rating group, Fitch Ratings, said that it was assessing MPC and Southern Company’s credit rating and it would likely be reduced a notch, maybe two. This would make the cost of doing Kemper-coal business even more expensive.

Our Mississippi’s Public Service Commissioners are now in an even bigger bind. They have to determine who pays for this boondoggle: Mississippi consumers and taxpayers or Southern Company and its shareholders.

Public Service Commissioner Steve Renfroe told the Mississippi Business Journal that “so much is up in the air now.” Renfroe is in the last year of his term as the Commissioner from South Mississippi, but stressed that the PSC initiated a cap to protect ratepayers and taxpayers. But as costs for the facility continue to rise, there is a growing concern over who pays the bills. Soon there will be a “prudency hearing” that will determine what additional costs for the plant were “necessary and effective.” That effective part will be even more laughable when they finally try to flip the switch.

“Even if those costs are considered prudent,” Renfro stated, “anything above the cap can not be passed on to ratepayers.” But you better believe Southern Company is interested in who ends up on the Public Service Commission come January 2016 and are supporting a few “choice” candidates.

Cecil Brown is likely not one, although you can bet Southern Company would be happy to throw money in his direction. A former state legislator who had his district gerrymandered out of existence by our Republican majority, Brown is running for Public Service Commissioner from the Central District. As a legislator, Brown says he voted for the Base Load Act that Mississippi Power Company used in funding the plants construction. “I became more interested when it became clear that the plant would be substantially over budget and the PSC would have serious decisions to make about the future of the project.”

Brown is hoping to see Mississippi “push for the development of all forms of energy: solar, wind, hydroelectric, geothermal.” He then added, “I also think we need to continue to try to find ways to produce nuclear energy safely.” As stated in a previous Kemper column: Grand Gulf has proven that we can and do. And it’s cheaper. Much cheaper.

Brown says he may be willing to give Southern Company the benefit of the doubt, “If clean coal works and is economically competitive, it could be part of the strategy.” He’s being too kind. Whether through gasification, carbon capture, or any other process referred to as “clean” in the industry’s clever Orwellian speak, burning more coal should never be considered part of any long-term energy strategy.

Coal is only economically competitive because our national leadership, and our state leadership, has spent billions propping up this cheap, dirty industry and its polluters for years. Even tree-hugging Al Gore has promoted the ridiculous “clean” coal concept. We have done this at the expense of real and sustainable energy development, better jobs, and a safer environment.

Brown is rightfully concerned about the future of MPC. “MPC serves 186,000 customers directly and another 400,000 through electric power associations. It is important to those folks that the company is able to continue service.” Still, Brown says he does not believe MPC customers should pay for the company’s mistake.

No consumer should have to supply a company money up front to promote a new technology. That’s a job for investors. One would think the rates should decrease with a better, high-efficiency plant, not increase. Thanks to our state leadership, we have been forced to do it backwards in Mississippi and now we are over a barrel of something that smells anything but “clean.”

» David Dallas is a political writer for the Mississippi Business Journal. He worked for former U.S. Sen. John Stennis and authored Barking Dawgs and A Gentleman from Mississippi.

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2 comments

  1. Mr. Dallas,

    Thank you for your continuing commentary on the Kemper plant saga. While the Kemper plant may be providing local benefits in the case of increased income for local businesses, construction jobs for some local folks, and reduced land taxes in the general area, the overall adverse impacts of Kemper are being felt all across the state. Not only are the 186,00 customers of MS Power being financially penalized through an improper rate increase, but the rural electric co-ops that distribute MS Power electricity have seen their costs go up and have pass along these increases to the 400,000+ customers they serve. Even tax payers have been hit when you think about the numerous local, state and federal facilities that have to pay more for electricity. Taxpayers foot the bill.

    Please note the Mr. Brown is not the only candidate in this race that has a strong opinion regarding the Kemper project. I would ask that you visit my website at http://brentbailey4psc.com/issues/ and read my thoughts and history regarding the Kemper facility.

    Prior to the MPSC authorizing the Kemper certificate for public convenience and necessity, I urged the MPSC and MS Power to examine more cost-effective alternatives to Kemper. However, the alternatives – energy efficiency programs and distributed generation standards – were dismissed as cost-prohibitive and unable to add significantly to capacity.

    Since that time, the MPSC has funded cost-benefits studies that analyze both the cost-effectiveness of energy efficiency programs and solar distributed generation. Per the findings of the two reports: Efficiency programs would be cost-effective, save substantial amounts of energy, capacity and water over the long-term, increase job growth, and have a positive impact on small businesses. Distributed generation can provide net benefits to Mississippi, AND can put downward pressure on electric rates while a wide range of utility costs are avoided and risks are reduced.

    So, what were the real reasons for building Kemper?

  2. September 25, 2015
    Dear Sirs,
    On November 3, we will be voting for our new Central District Public Service Commissioner. The person who is elected to this position will have a tremendous impact on all of us who use any utilities in our daily lives. We must depend on that person to advocate for the consumer and not for big business.
    I believe that Cecil Brown is the person who will represent the public’s interest with fairness and respect for how we spend our hard earned dollars. He has stated that he will never vote for a rate increase for us to pay for Southern Company’s mistakes in building the Kemper Power Plant. They are grossly over budget and continue to spend money on Kemper and expect the public in Mississippi to hand over our pocket books to pay for it. That is just wrong!
    The Public Service Commission is the only group that stands between the public and big utilities. They must represent the public’s interest by keeping our rates fair and affordable. We need Cecil Brown’s leadership on this commission to make sure that fairness and transparency for ratepayers is protected. It’s only right that Southern Company has to make its own budget work. When we, the public, make our budgets and we don’t have enough money to pay for our expenses, we cut back. We need Cecil to make sure Southern Company does the same.
    Let’s make sure we elect Cecil Brown as our next PUBLIC Service Commissioner.
    Sincerely, Amos Jones

    Meridian,MS

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